Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 7, Problem 6PEB
To determine
Determine the value of inventory based on lower of cost or market price.
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On the basis of the following data, determine the value of the inventory at the lower of cost or market. Assemble the data in the form illustrated in Exhibit 10.
Product
Class 1:
Model A
Model B
Model C
Class 2:
Model D
Model E
Product
Model A
Model B
Model C
Model D
Model E
Total
Product
Class 1:
Model A
Model B
Model C
Class 2:
Total
Subtotal
Model D
Model E
Inventory
Quantity
Total
26
a. Determine the value of the inventory at the lower of cost or market applied to each item in the Inventory.
Subtotal
Product
Model A
Model B
Model C
Model D
Model E
26
10
49
9
b. Determine the value of the inventory at the lower of cost or market applied to each class of inventory.
Cost Per
Unit
Inventory
Quantity
Inventory at the Lower of Cost or Market
Market Value
per Unit
Inventory Cost
Quantity per Unit (Net Realizable Value)
Cost
per Unit
$149
284
147
54
121
00000
Market Value per Unit
(Net Realizable Value)
88
38
00000
$137
274
143
46
Inventory at the
Lower of Cost
or Market
Market Value
per…
Briefly explain the usefulness of the inventory figure resulting from the application of lower of cost and net realizable value
Explain the inventory cost flow assumption: FIFO, LIFO, weighted average. Provide examples.
Chapter 7 Solutions
Financial Accounting
Ch. 7 - Prob. 1DQCh. 7 - Why is it important to take a physical inventory...Ch. 7 - Do the terms FIFO, LIFO, and weighted average...Ch. 7 - If merchandise inventory is being valued at cost...Ch. 7 - Which of the three methods of inventory...Ch. 7 - If inventory is being valued at cost and the price...Ch. 7 - Using the following data, how should the...Ch. 7 - The inventory at the end of the year was...Ch. 7 - Hutch Co. sold merchandise to Bibbins Company on...Ch. 7 - A manufacturer shipped merchandise to a retailer...
Ch. 7 - The following three identical units of Item A are...Ch. 7 - The following three identical units of Item Beta...Ch. 7 - Beginning inventory, purchases, and sales for Item...Ch. 7 - Beginning inventory, purchases, and sales for Item...Ch. 7 - Beginning inventory, purchases, and sales for Item...Ch. 7 - Beginning inventory, purchases, and sales for Item...Ch. 7 - Beginning inventory, purchases, and sales for...Ch. 7 - Beginning inventory, purchases, and sales for...Ch. 7 - The units of an item available for sale during the...Ch. 7 - Prob. 5PEBCh. 7 - On the basis of the following data, determine the...Ch. 7 - Prob. 6PEBCh. 7 - During the taking of its physical inventory on...Ch. 7 - During the taking of its physical inventory on...Ch. 7 - Financial statement data for years ending December...Ch. 7 - Financial statement data for years ending December...Ch. 7 - Triple Creek Hardware Store currently uses a...Ch. 7 - Hardcase Luggage Shop is a small retail...Ch. 7 - Beginning inventory, purchases, and sales data for...Ch. 7 - Assume that the business in Exercise 7-3 maintains...Ch. 7 - Beginning inventory, purchases, and sales data for...Ch. 7 - Assume that the business in Exercise 7-5 maintains...Ch. 7 - The following units of an item were available for...Ch. 7 - Prob. 8ECh. 7 - The following units of a particular item were...Ch. 7 - Assume that the business in Exercise 7-9 maintains...Ch. 7 - Assume that the business in Exercise 7-9 maintains...Ch. 7 - The units of an item available for sale during the...Ch. 7 - The units of an item available for sale during the...Ch. 7 - Assume that a firm separately determined inventory...Ch. 7 - On the basis of the following data, determine the...Ch. 7 - Based on the data in Exercise 7-15 and assuming...Ch. 7 - Missouri River Supply Co. sells canoes, kayaks,...Ch. 7 - Fonda Motorcycle Shop sells motorcycles, ATVs, and...Ch. 7 - During 20Y5, the accountant discovered that the...Ch. 7 - The following data (in millions) were taken from...Ch. 7 - Kroger, Sprouts Farmers Market, Inc., and Whole...Ch. 7 - A business using the retail method of inventory...Ch. 7 - A business using the retail method of inventory...Ch. 7 - A business using the retail method of inventory...Ch. 7 - On the basis of the following data, estimate the...Ch. 7 - The merchandise inventory was destroyed by fire on...Ch. 7 - Based on the following data, estimate the cost of...Ch. 7 - Based on the following data, estimate the cost of...Ch. 7 - The beginning inventory at Midnight Supplies and...Ch. 7 - The beginning inventory at Midnight Supplies and...Ch. 7 - The beginning inventory for Midnight Supplies and...Ch. 7 - The beginning inventory for Midnight Supplies and...Ch. 7 - Dymac Appliances uses the periodic inventory...Ch. 7 - Data on the physical inventory of Ashwood Products...Ch. 7 - Selected data on merchandise inventory, purchases,...Ch. 7 - The beginning inventory of merchandise at Dunne...Ch. 7 - The beginning inventory for Dunne Co. and data on...Ch. 7 - The beginning inventory for Dunne Co. and data on...Ch. 7 - The beginning inventory for Dunne Co. and data on...Ch. 7 - Pappas Appliances uses the periodic inventory...Ch. 7 - Data on the physical inventory of Katus Products...Ch. 7 - Selected data on merchandise inventory, purchases,...Ch. 7 - Sizemo Elektroniks sells semiconductors that are...Ch. 7 - Anstead Co. is experiencing a decrease in sales...Ch. 7 - Golden Eagle Company began operations on April 1...Ch. 7 - The following is an excerpt from a conversation...Ch. 7 - Target Corp. sells merchandise primarily through...Ch. 7 - Prob. 7CP
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- Considering the following information, and applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?arrow_forwardThe following information is taken from a companys records. Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?arrow_forwardWhen inventory items are highly specialized, the best inventory costing method is ________. A. specific identification B. first-in, first-out C. last-in, first-out D. weighted averagearrow_forward
- Use the weighted-average (AVG) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.arrow_forwardUsing the following data, how should the merchandise be valued under lower of cost or market?arrow_forwardWhen inventory is purchased in a basket purchase, several steps are required. Which of the following is NOT one of the required steps? Estimate the market value of each item. Divide the market value of each item by the total market value for the basket. Divide the allocated cost by the number of units to determine the cost per unit. Compare the allocated cost to the traditional historical cost and use the lower value.arrow_forward
- Which of the following statements about FIFO is true? Select one: a. All of the statements are correct b. Cost of goods sold is calculated using the costs of the earliest purchased inventory. c. The value of merchandise inventory is made up of the costs of the most recently purchased inventory. d. Under FIFO, a schedule is used to track the different costs of purchased inventory.arrow_forwardWhich of the three methods of inventory costing— FIFO, LIFO, or weighted average cost—will in general yield an inventory cost most nearlyapproximating current replacement cost?arrow_forwardThe process of recording inventory that gives a lower cost of a commodity sold in an income statement is denoted as Select one: a. Last Out Receivable b. First in First Out c. First Out Receivable d. Last in First Outarrow_forward
- On the basis of the following data, determine the value of the inventory at the lower-of-cost-or-market by applying lower-of-cost-or-market to shown in Exhibit 10.arrow_forwardWhich of the three methods of inventory costing -FIFO, LIFO, or weighted average cost - will in general yield an inventory cost most nearly approximating current replacement cost? Why?arrow_forwardcalculate cost of goods sold, gross margin and ending inventory using i) FIFO and ii) Weighted - averagearrow_forward
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